Sandhya Sahebrao Badekar vs Sebi

DATE : 05.06.2018

Misc. Application No. 117 of 2018 And Appeal No. 154 of 2018

Sandhya Sahebrao Badekar 115B, Shalimar Miracle, Opp. ICIC Bank, S. V. Road, Goregaon (West), Mumbai 400 062. ..... Appellant

Versus

Securities Exchange Board of India SEBI Bhavan, C-4A, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. ... Respondent

Mr. K. K. Rathi, Chartered Accountant for the Appellant. Mr. Vishal Kanade, Advocate with Mr. Chirag Bhavsar, Advocate i/b MDP & Partners for the Respondent.

CORAM : Justice J. P. Devadhar, Presiding Officer Dr. C. K. G. Nair, Member

Per : Justice J. P. Devadhar (Oral)

Misc. Application No. 117 of 2018 :

1.

By this misc. application appellant seeks condonation of 160 days

delay in filing the appeal. For the reasons stated in the misc. application,

delay is condoned. Accordingly, misc. application is disposed of.

Appeal No. 154 of 2018 :

1. This appeal is filed to challenge the order passed by the Adjudicating

Officer ('A. O.' for short) of Securities and Exchange Board of India

('SEBI' for short) on August 4, 2017. By that order A. O. has imposed

penalty of Rs. 15 lac on the appellant and two other persons, namely, Siya

Bansal and Rajan Bansal under Section 15HA of the Securities and 2 Exchange Board of India Act, 1992 ('SEBI Act' for short) for violating the

Securities and Exchange Board of India (Prohibition of Fraudulent and

Unfair Trade Practices Relating to Securities Market) Regulations, 2003

('PFUTP Regulations' for short).

2. It is not in dispute that Appeal no. 67 of 2018 filed by Siya Bansal

and Rajan Bansal to challenge the aforesaid decision of A. O. has been

dismissed by this Tribunal on April 6, 2018.

3. In the impugned order it is held that the trades executed by the

appellant were held to be in violation of PFUTP Regulations for the

following reasons :-

a) On December 27, 2011 at 12:42:27, appellant had placed a buy

order for 2000 shares of KGN Enterprises Ltd. at Rs. 50/- per

share which resulted in 11 trades (20 shares), 5 trades (5 shares)

with Siya Bansal and 6 trades (15 shares) with Rajan Bansal.

b) Appellant placed a buy order for 2000 shares at Rs. 50/- at

12:34:39 which was later on modified by reducing the buy order

quantified to 200 shares from 2000 shares and at 12:37:35

increased the order rate from Rs. 50/- to Rs. 125/- at 12:38:26,

however, the order remained unexecuted as at that point of time

there were no sell orders pending in the system. Thereafter, the

appellant modified the buy order at 12:42:27 by reducing the buy

quantity to 100 shares from 200 shares and increased the buy rate

from Rs. 125/- to Rs. 500/-, when the sell orders were available

in the range of Rs. 200 to Rs. 500/-

c) As the appellant modified the buy order from Rs. 125/- to Rs.

500/- at 12:42:27 the sell orders placed by Siya Bansal and 3

Rajesh Bansal got executed at the price of Rs. 500/-. It is

relevant to note that all the sell orders were placed at different

price range i.e. Rs. (300, 350, 400, 450, 481, 483, 488, 489, 490,

499 and 500) when the shares prices were hovering between

Rs. 50 to Rs. 150. Thus, all the 11 trades executed created New

High Price (NHP).

4. On the basis of aforesaid facts, the A. O. has held that the appellant

had executed irregular trades to inflate the share price by trading in small

quantities and thereby contributed NHP of Rs. 250/- in 11 trades for 20

shares in violation of PFUTP Regulations.

5. Representative of the appellant has not disputed that the trades were

irregular trades, however, he sought to justify the trades on the basis of

facts set out in the memo of appeal which read thus :-

"4. That the appellant submits that on 27.12.2011 she had requested her dealer to invest around Rs. 50000/- in the shares of KGN Enterprises Ltd. As she had been informed by her train friend that the sister concern of KGN Enterprise, namely KGN Industries had touched high price of Rs. 55000/- per shares on day of listing.

5. That the appellant submits that she had placed only one order which was later on modified as advised by her dealer. She had not placed any multiple order but requested her dealer to modify the order to highest price in order to get the shares, without realizing that she is creating new high price (NHP).

6. That the appellant submits that there was no malafide intention or any misdoing on their part, who was simply trying to invest her savings to make some earning based on information she had received.

7. That the appellant further submits that she was never informed about warning flashed and had no idea about its consequences. The appellant further submits that had her broker informed her about the consequences of the trade, she would never had proceeded further in the trade."

6. We see no merit in the above augments.

4

7. Conduct of the appellant in placing buy orders which were modified

time and again within a short period of time clearly shows that the

transactions were not bonafide transactions. Appellant has failed to

disclose the basis on which the buy order price was enhanced repeatedly.

Very fact that the quantum of buy order was reduced again and again

falsifies the claim of the appellant that a train friend had induced the

appellant to execute the trades in question. Argument that the broker is

responsible for the irregular trades cannot be accepted, because, firstly, no

such plea was raised in the reply to the show cause notice and secondly,

appellant has not filed any complaint against the broker till date. In these

circumstances, no fault can be found with the decision of the A. O. that the

appellant has violated the PFUTP Regulations.

8. Penalty imposable under the SEBI Act for violating the PFUTP

Regulations under Section 15HA of SEBI Act is up to Rs. 25 crore.

However, the A. O. after considering all mitigating factors has imposed

penalty of Rs. 15 lac on the appellant which cannot be said to be

unreasonable or excessive.

9. In the result, we see no merit in the appeal and the same is hereby

dismissed with no order as to costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Dr. C. K. G. Nair Member 05.06.2018 Prepared & Compared by PTM